Investing

Case Study: Financial Planner

As the range of clients and investors incorporating XTBs into their portfolios continues to grow, we talk to some key clients about XTBs and why they find them beneficial in their portfolios.

Shane Casey, Eclipse Financial Management

“The predictability of receiving known income on set dates has been of great comfort to my clients.”

IN SUMMARY
Company Eclipse Financial Management
Location Mornington Peninsula
Title Senior Financial Planner
Brief overview At Eclipse Financial Management, we believe in comprehensive financial planning that is based on a clear and accurate understanding of current situation, goals and personal aspirations.

What have you traditionally used for fixed income and what attracted you to XTBs?

“Before discovering XTBs, I used a range of fixed income ETFs and managed funds for the fixed income allocation for my clients. I began looking for alternative solutions for two key reasons:

  1. Bond managed funds and ETFs were not offering my clients the predictability that I wanted in their portfolios. Fixed income should offer the predictability of a fixed return. But, being perpetual, bond ETFs and managed funds can’t offer that.
  2. For new clients I wanted to offer a fixed income solution that provided a reliable income, before they reached retirement.”

How did you hear about XTBs?

“I spoke with a number of colleagues regarding alternative solutions that could fit my client’s needs. Some of the options that I looked at, and dismissed in favour of XTBs, included:

  • Annuities. These may have worked, but they weren’t available at the time on the Wrap Platform I was intending to use. Also, I had concerns regarding their flexibility should a client need to make a partial withdrawal in the future.
  • Wholesale Bonds. Again, these were not available on Wrap Platforms. I also wasn’t happy with the limited price visibility and lack of easy redemption capabilities.
  • Fixed income ETFs. The range of fixed income ETFs was growing, however I didn’t want my clients stuck tracking the bond index, with its lower yield. There wasn’t a suitable fixed income ETF available to provide the level of income required.

It was suggested that I review a new product called XTBs and was then referred to one of the XTB distribution team. They took me through the product in more detail and together we developed customised portfolios specific to my client’s needs.”

What stood out to you about XTBs vs other fixed income solutions?

“There were a few key points that made XTBs my preferred solution for my clients:

  • Availability on platforms was a big benefit to me – being ASX-traded created superior efficiency.
  • Minimum parcel size of $100 face value units was very attractive. This allowed me to easy diversify my client’s portfolios. It provided superior flexibility for those clients who needed to make smaller redemptions.
  • The assigned XTB Market Maker provides liquidity of purchasing through the platform. This gave me great comfort in always having a sell price and liquidity, enabling client to sell part or all of their allocations should they need to.
  • Finally, the fact that XTBs were all over the bonds of well-known companies. Companies my clients are familiar with and felt comfortable that they provided the protection of capital that they wanted for their fixed income allocation. No one wants to put their fixed income allocation at risk.”

What’s a specific XTB strategy that you have implemented for your clients?

“Following the closure of a large local employer a number of new clients who were either close to, or in retirement came to me for help.

These clients’ required ‘known outcomes’ in relation to the income they required. This was particularly important for my ‘Transition to Retirement’ clients as they needed the redundancy capital to provide their income before they reached retirement. Following discussions with the XTB team as to the best way to achieve this outcome I decided to build an outcomes based portfolio, building from this requirement for income.

I created a series of customised Maturity Ladder portfolio of XTBs. This solution allowed me to isolate capital from the client’s total investable assets to this portfolio and most importantly to generate the income each client required – I knew when the income would be paid and when the XTBs would mature. The remainder was to be invested into growth assets which were left to grow over the set period of time (determined by the client’s time to retirement).

The required income would be supplemented by both capital and income/maturity value and coupons.

Example Maturity Ladder Portfolio: Income and Capital Flows

DATE INCOME PRINCIPAL
Investment $0.00 -$499,623
2017 $21,849.88 $0
2018 $28,305.75 $77,700
2019 $23,838.00 $78,500
2020 $18,539.25 $75,900
2021 $11,557.50 $69,800
2022 $4,470.00 $148,400
TOTAL $108,560.38 $450,300

The client required approximately $80k per annum in income until reaching preservation age (60), in 2023. This portfolio allowed for the specific level of income to be generated via coupon payments and through the capital returned as each XTB matured.”

What has been your experience of the XTB portfolios to date?

“I have held these portfolios for well over 12 months now. During this time the portfolios have performed exactly as expected. All coupon payments have been made on time and the first XTB in the portfolio has matured with the face value received.

The predictability of receiving known income on set dates has been of great comfort to my clients – after a turbulent time in their lives, they were looking for an investment without any surprises, but one which still performs better than other fixed income alternatives. The XTB portfolio I created has delivered on both counts.”

What do you think is currently most important for investors to be aware of?

“I am of the opinion that there is always an investment cycle. Sometimes there are long periods of good growth, low inflation and great returns. However, this is usually followed by volatility, downturn in the market and low interest rates.

Higher returns come with higher risk. Everything is fine whilst the market is soaring and everyone is getting good returns. Clients are happy with risk profiles that are skewed toward Growth/High Growth. It is only in a downturn that we find out that the real risk profile is more likely to be Conservative to Balanced.

Avoid too much gearing. Gearing not only magnifies the gains, but also the losses. Everything is fine whilst the market is growing, but in a downturn it can be disastrous.

Finally, diversification – it is really important to not have all of your eggs in the one basket. Any well constructed portfolio that matches your client’s risk profile should contain every asset class. Cash, Bonds, Fixed Interest investments, Australian shares, International shares all performing at different levels of returns to provide a truly diversified portfolio.”

How would you sum up XTBs 

“If you are looking for an investment that has a fixed outcome and your clients do not have the experience or the hundreds of thousands to place the funds themselves into a wholesale investment bonds, XTBs are a great alternative.

XTBs can provide you with a portfolio where you can show what income will be received and when that can achieve a reasonable good return.”

More about Shane

“I have been a Senior Financial Planner since 2002. Currently, I am the Managing Director of Eclipse Financial Management based in Mornington Peninsula, Victoria. I have previously worked within boutique financial planning practices and also the major banks in Australia as a Financial Planner.

In 2009 started my own business, Eclipse Financial Management, where I am the Managing Director, and Principle planner. I manage a 7-person team, consisting of 2 other financial planners and support staff.

We cover a wide variety of clients. Our typical clients are ‘Transition to Retirement’ or Retired with either an SMSF or Superannuation investments to be managed.

What I enjoy the most about my job is helping my clients achieve their goals throughout various life cycles. This is the most rewarding part of being a financial planner.”

For more information:

T: 03 5973 6844

W: www.eclipsefm.com.au

Disclaimer:
The views expressed in this case study are not necessarily the views of XTB.  The information in this article is general in nature. It should not be the sole source of information. It does not take into account the investment objectives or circumstances of any particular investor. You should consider, with or without advice from a professional adviser, whether an investment is appropriate to your circumstances. Australian Corporate Bond Company Limited is the Securities Manager of XTBs and will earn fees in connection with an investment in XTBs.

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